European Companies Look Further Afield for Funding

The banking groups used by large European companies are shrinking, reports Greenwich Associates. After briefly spiking during the global financial crisis, the average number of banks servicing big European companies has returned to a downward trajectory that started a decade ago.

The market intelligence group’s report, entitled
‘European Companies Turn to Foreign Banks’
finds that the typical large European company (with at least €500m in turnover) used approximately 12 banks, with two-to-three of those banks considered lead relationships a decade ago while today the overall average has declined to fewer than 10 banks, with approximately two lead relationships.

A surprising finding is that large European companies are not necessarily replacing top-tier European and global banks from the same pool, or even from the relatively large group of regional European banks and national champions. In fact, the number of banking relationships held by mid-tier European banks is actually on the decline. One reason: In a growing number of cases large European companies are turning to a new resource: foreign banks specialising in specific international markets.

The research shows regional banks from Asia and Latin America are winning a share of relationships formerly held by European banks as growing numbers of companies are crossing the threshold at which they require specialised, local coverage in specific foreign markets.

“Large regional banks from Brazil and other markets are winning relationships with the very biggest European companies, who have the most extensive overseas operations and the most extensive banking needs,” said Greenwich Associates consultant Dr Tobias Miarka. “These banks are already setting their sights on the next tier of large European corporates with fast-growing businesses in the banks’ home regions.”

One additional factor could be at play: regulatory impact. Non-European banks from developing counties with less stringent regulatory frameworks could be enjoying an advantage over competitors domiciled in developed and more highly regulated markets.

Within this continuously evolving marketplace, the group reports that BNP Paribas has established itself as the clear leader in pan-European corporate banking. Across Europe, 58% of large companies use BNP Paribas for corporate banking services, followed by HSBC at 51%, Deutsche Bank at 48%, RBS at 43%, and the only non-European player in the group, Citi, at 39%.

Within the eurozone, two thirds of large companies use BNP Paribas for corporate banking, followed by Deutsche Bank at 54%, HSBC at 50%, UniCredit at 47%, and Commerzbank at 42%. In cash management, BNP Paribas leads with a market penetration score of 36% across Europe and 45% within the eurozone. On a pan-European basis, HSBC ranks second in cash management, followed by a tie between Citi and Deutsche Bank and, finally, RBS.

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